Bonds: From high yield to below yield

It is hard to think of a more bizarre consequence of quantitative easing (QE) than negative yielding high-yield bonds.

Indeed, it seems that the capital markets have entered their own Bizarro World, the comic book realm where everything is the opposite of what it should be.

Zero or negative yielding high-quality bonds have been a feature of the bond market for years.

Worldwide, $7 trillion of government bonds yield negative interest rates. In late June, the surreal prospect of the two-year debt of Italy – a country with a debt-to-GDP ratio of 132% and rising – turning negative became a reality.